The sub prime mortgage crisis has become a vital issue in the economy today. More and more people are being persecuted by this crisis. Though sub prime mortgages actually constitute only 7% of all the loans in the country, it accounts for 43% of the loans that have been actually foreclosed in the third quarter. Many powerful banks and brokers invested in Structured Investment Vehicles (S.I.V.s), and in this situation of crisis, these investors are salvaging and lending a helping hand to these S.I.V.s, and similarly these brokers and banks are being helped by the foreign investors and the federal reserve.
For examples, organizations in Singapore and U.A.E. have lent a hand in the past to American corporations like Merrill Lynch and other money Center banks, and offered a lot of money in cash. The person who has been the worst sufferer in all this is the common man, there are no foreign investors to bail him out. Congress has recently intervened and arranged for tax relief for the common man. The past year, 2007, the hardships of the homeowners reached an all time high. According to the Mortgage bankers association over 995,000 homes are in foreclosure now. Earlier, on top of this misfortune of foreclosure, you would have been taxed by the government on the forgiven debt that occurs from a foreclosure, for the government considered that as taxable income.
IRS sent a under reporter letter to all those people who did not address the foreclosure about their returns. As a result the forgiven debt caused accumulation of tax debts. But with the Mortgage Forgiveness Debt Relief Act of 2007; all that has changed. The congress actively seeks to bail out these unfortunate people affected by the crisis. Taxes on forgiven debts are waived for a period of 3 years under the new laws of mortgage forgiveness debt relief act, for example H.R. 3648 suspends tax on forgiven debts from foreclosures, (1/1/07 through 12/31/09). It has been calculated that this law might save the money of the people affected by foreclosures up to $600 million. However it is not applicable to those affected before the start of 2007. But the law includes within its ambit loan renegotiation plans and also maybe, partial reduction of debt.
Rather than face foreclosure the Mortgage Forgiveness Debt Relief Act may be able to a person out. Normally when a forgiveness of debt occurs it is viewed as an income gained, reported on taxes as such and therefore taxed by the government, even though in the case of debt forgiveness there was no actual money to tax. The government realizing the increasing number of foreclosures tried to decrease the number of foreclosures through allowing resolved or cancelled debts to not be taxed, truly making the debts forgiven and nothing to be paid back. If a mortgage refinance was done, the cash-out option to the refinance will depend on whether a person can qualify for the Mortgage Forgiveness Debt Relief Act. Checking with a professional will help to decide if one qualifies or not. With the recent mortgage crisis and declining values in homes and poor resale of homes, more and more homeowners are in desperation for some kind of help from the government.
While this may help an individual, there are other methods to prevent a person from foreclosure on their home and marring their credit score for a long time to come. Debt counselors are many times able to provide areas of improvement in everyday life to gather wasted money spent. Another way is to take on sources of additional income, a second job or selling unused or unwanted items or perhaps adding a roommate to help pay with the source of many financial problems, especially today ? the mortgage. This last option can actually make the home help pay for itself.
Learn more about Obama Mortgage Relief Plan Qualifications.
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